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The Russian central bank has stated it is claiming damages valued at $230 billion against the financial institution Euroclear. This action constitutes a clear response from the Kremlin regarding plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the central bank initiated a claim last week for roughly 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders will determine in the coming days on a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian frozen sovereign wealth.

Divergent Legal Views

EU authorities have argued that their plan is on solid legal ground. Their position rests on the principle that title of the sovereign wealth remains with Russia, despite being it was frozen in EU countries following the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the assets as theft. Authorities have warned of retaliatory measures, such as confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. It has previously stated it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to seek enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be identified," commented a lawyer from an international firm.

European Safeguards

EU officials said they are working on steps to discourage other nations from aiding any Russian legal action against EU companies. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would solely be required to return the money if and when Russia consented to pay reparations for the immense damage caused during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a clear message that when you do all this damage to another nation, you have to pay for the reparations."